8.5 The Place of Policy
Government policy provides a framework for individual agents to go about their business. Consumers, firms, third sector organisations and government agencies make their decisions in the light of their own objectives and resources, market opportunities and government policies. These agents desire consistent government policies which facilitate trust and provide investment confidence. Given a satisfactory framework, competitive markets have the potential to provide the quantity and quality of goods and services that satisfy consumers. Even with the provision of such a framework, market failure can result, and the primary market failures of concern in agriculture and horticulture are externalities and public goods. Government interventions should be considered where externalities exist, or where the production of public goods is important. Such consideration should establish if there is evidence of market failure, clarify the policy options available and evaluate the potential to reduce, minimise, or eliminate the market failure problem in a cost-effective manner. Government policy is also important in directing the use of government resources. In an age of smaller policy oriented ministries (when many services previously provided by the public sector are provided by the private sector) it is critical that government uses its resources effectively on issues of current and future importance.
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